The following Management's Discussion and Analysis ("MD&A") of our Financial
Condition and Results of Operations should be read in conjunction with the
financial statements and notes thereto included as part of this Annual Report on
Form 10-K. Our MD&A is provided to assist readers in understanding our
performance, as reflected in the results of our operations, our financial
condition and our cash flows. The following discussion summarizes the
significant factors affecting our operating results, financial condition,
liquidity and cash flows as of and for the periods presented below. This MD&A
should be read in conjunction with our financial statements and related notes
thereto included elsewhere in this report. Our future results could differ
materially from our historical performance as a result of various factors such
as those discussed in Part I, Item 1A of this Form
10-K
under the heading "Risk Factors" and in this Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
This section and other parts of this Annual Report on
Form 10-K ("Form 10-K") contain
forward-looking statements are prospective in nature and are not based on
historical facts, but rather on current expectations and projections of the
management of the Company about future events and are therefore subject to risks
and uncertainties which could cause actual results to differ materially from the
future results expressed or implied by the forward-looking statements. All
statements other than statements of historical facts included herein, may be
forward-looking statements. Without limitation, any statements preceded or
followed by or that include the words "plans," "believes," "expects," "intends,"
"will," "should," "could," "would," "may," "anticipates," "might" or similar
words or phrases, are forward- looking statements. These forward-looking
statements are not guarantees of future financial performance. Such
forward-looking statements involve known and unknown risks and uncertainties
that could significantly affect expected results and are based on certain key
assumptions, which could cause actual results to differ materially from those
projected or implied in any forward-looking statements.
The forward-looking statements included in this Form
10-K
are made only as of the date hereof. We undertake no obligation to publicly
update any forward-looking statement as a result of new information, future
events or otherwise, except as otherwise required by law. If we do update one or
more forward-looking statements, no inference should be made that we will make
additional updates with respect to those or other forward-looking statements.
For additional information, refer to the section entitled "Cautionary Note
Regarding Forward Looking Statements."
Mūsų verslo apžvalga
We are a frozen food company that develops, markets, and manufactures foods that are designed to be high in protein, low in sugar, gluten and grain- free. We, along with our co-manufacturers, produce breakfast sandwiches, entrées, and other products, which are primarily sold in theU.S. frozen food category, excluding frozen and refrigerated meat. Our customers include retailers, which primarily sell their products through natural and conventional grocery, drug, club, and mass merchandise stores throughoutthe United States . We also sell our products through our e-commerce channel, which includes direct-to-consumer sales through our website, as well as sales through our retail customers' online platforms. Since our inception, we have focused on creating health and wellness ("H&W") products for the frozen food aisle, where we believe H&W brands are underrepresented compared to other categories. We compete in multiple large subcategories within theU.S. frozen food category, including frozen entrée and breakfast, which we consider our two core, strategic growth subcategories. Currently, we sell comfort foods such as our bacon wrapped stuffed chicken, chicken enchiladas, grain-free cheesy bread breakfast sandwiches, and various entrée bowls. All of our products are prepared with our proprietary ingredient systems and recipes, allowing us to provide consumers with delicious meals designed to be high in protein, low in sugar, and gluten and grain free. OnNovember 4, 2021 ,Real Good Foods, LLC ("RGF"), the successor to TheReal Good Food Company LLC (the "Predecessor"), underwent a reorganization whereby the RGF become a subsidiary of TheReal Good Food Company, Inc (the "Company"). TheReal Good Food Company, Inc. completed an initial public offering 38
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("IPO") on November 9, 2021 , in which it issued and sold shares of its class A
common stock, $0.0001 par value per share, at an offering price of $12.00 per
share. For periods subsequent to November 4, 2021 , any references to the Company
shall imply The Real Good Food Company, Inc. , and its consolidated subsidiary.
Tendencijos ir kiti veiksniai, darantys įtaką mūsų verslui
We compete within the$179 billion U.S. health and wellness ("H&W") industry, as measured bySPINS, LLC , an independent industry and research organization ("SPINS"), during the 52 weeks endedDecember 26, 2021 . Our results are impacted by economic and consumer trends, and changes in the food industry market dynamics, such as sourcing and supply chain challenges. Changes in trends in consumer buying patterns may impact the results of our operations. In recent years, there has been an increased focus on healthy eating and an increase in focus on natural, organic and specialty foods. We have benefited from this trend, as well as from the increase in in-home consumption as a result of the COVID-19 pandemic (the "Pandemic"). However, consumer spending may shift to the food-away-from-home industry, as the impact of the Pandemic subsides. We believe the trend in in-home consumption positively affected our sales, given the increase in demand of our retail customers during 2021, which we expect to continue into the next year. However, cost challenges have persisted due to supply and recent supply chain disruptions, and an increase in costs for certain ingredients in our products may continue into the next year. In addition to the above, we believe that changes in work patterns, such as work being performed outside of the traditional office setting, will continue to contribute to in-home consumption. The pandemic also drove significant growth in eCommerce utilization by grocery consumers, and we expect that trend to continue as well. However, should such demand persist, there may be a significant increase in new market entrants within the same space.
Mūsų veiklos rezultatų sudedamosios dalys
Our net sales are primarily derived from the sale of our products directly to our retail customers. Our products are sold to consumers through an increasing number of locations in retail channels, primarily in natural and conventional grocery, drug, club and mass merchandise stores. We sell a limited percentage of our products to consumers through "click-and-collect" e-commerce transactions, where consumers pick up their product at a retailer following an online sale, and traditional direct-to-consumer "deliver-to-me" e-commerce transactions through our own website and third-party websites. We record net sales as gross sales net of discounts, allowances, coupons, slotting fees, and trade advertising that we offer our customers. Such amounts are estimated and recorded as a reduction in total gross sales in order to arrive at reported net sales. Gross Profit Gross profit consists of our net sales less cost of goods sold. Our cost of goods sold primarily consists of the cost of ingredients for our products, direct and indirect labor cost, co-manufacturing fees, plant and equipment cost, other manufacturing overhead expense, and depreciation and amortization expense, as well as the cost of packaging our products. Our gross profit margin is impacted by a number of factors, including changes in the cost of ingredients, cost and availability of labor, and factors impacting our ability to efficiently manufacture our products, including through investments in production capacity and automation.
Veiklos išlaidos
Pardavimo ir platinimo išlaidos
Our products are shipped from our and our
co-manufacturers'
facilities directly to customers' or to third-party logistics providers by truck
and rail. Distribution expense includes third-party freight and warehousing
costs, as
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well as salaries and wages, bonuses, and incentives for our distribution personnel. Selling expense includes salaries and wages, commissions, bonuses, and incentives for our sales personnel, broker fees, and sales-related travel and entertainment expenses. Marketing Expense Marketing expense includes salaries and wages for marketing personnel, website costs, advertising costs, costs associated with consumer promotions, influencer and promotional agreements, product samples and sales ads incurred to acquire new customers and consumers, retain existing customers and consumers, and build our brand awareness. Administrative Expense Administrative expense includes salaries, wages, and bonuses for our management and general administrative personnel, research and development costs, depreciation of non-manufacturing property and equipment, professional fees to service providers including accounting and legal, costs associated with the implementation and utilization of our new ERP system, insurance, and other operating expenses.
Nekontroliuojantis
Palūkanos
As the sole managing member of RGF, we operate and control all of the business and affairs of RGF. Although we have a minority economic interest in RGF, we have a majority voting interest in, and control the management of, RGF. Accordingly, we consolidate the financial results of RGF and report a non-controlling interest on our consolidated statements of operations, representing the portion of net income or loss attributable to the other members of RGF. The ownership percentages during the period are used to calculate the net income or loss attributable to TheReal Good Food Company, Inc. and the non-controlling interest holders. Segment Overview Our chief operating decision maker, who is our Chief Executive Officer, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance, as well as for strategic operational decisions and managing the organization. For the periods presented, we have determined that we have one operating segment and one reportable segment. In addition, all of our assets are located within theU.S.
Sezoniškumas
We experience mild seasonal earning characteristics, predominantly with products
that experience lower sales volume in warm-weather months. For example, our
bacon wrapped stuffed chicken experiences seasonal softness during months that
consumers prefer to grill outdoors instead of preparing microwaveable meals. In
addition, similar to other H&W brands, the highest percentage of our net sales
tends to occur in the first and second quarters of the calendar year, when
consumers are more likely to seek H&W brands. Further, certain of the
ingredients we process, such as cauliflower and artichoke hearts, are
agricultural crops with seasonal production cycles. These seasonal earning
characteristics have not historically had a material impact on our net sales
primarily due to the timing and strong growth of our total distribution points.
The bulk of our distribution point gains are a function of retailer
shelf-resets, which tend to occur during the third and fourth quarters of the
calendar year, which helps to support year-round performance across our product
offerings. As our business continues to grow, we expect the impact from
seasonality to increase over time, with net sales growth occurring predominantly
in the first and second quarters.
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Operacijų rezultatai
Fiskalinių metų palyginimas baigėsi
Šioje lentelėje pateikiami mūsų veiklos rezultatai per dvylika pasibaigusių mėnesių
Year Ended
December 31,
2021 2020 $ Change % Change
Net sales $ 84,085 $ 38,984 $ 45,101 115.7 %
Cost of sales 73,791 36,306 37,485 103.2 %
Gross profit 10,294 2,678 7,616 284.4 %
Operating expenses:
Selling and distribution 14,965 7,593 7,372 97.1 %
Marketing 20,649 2,351 18,298 778.3 %
Administrative 27,792 2,592 25,200 972.2 %
Total operating expenses 63,406 12,536 50,870 405.8 %
Loss from operations (53,112 ) (9,858 ) (43,254 ) 438.8 %
Interest expense 5,365 5,682 (317 ) -5.6 %
Other income (309 ) - (309 )
Change in fair value of convertible
debt 8,925 - 8,925
Loss before income taxes (67,093 ) (15,540 ) (51,553 ) 331.7 %
Income tax expense - 22 22
Net Loss $ (67,093 ) $ (15,562 ) $ (51,531 ) 331.1 %
Less: net loss attributable to
non-controlling interest (32,117 ) -
Less: net loss prior to the
reorganization (24,833 ) -
Preferred return on Series A
preferred units - 546
Net loss attributable to The Real
Good Food Company, Inc. $ (10,143 ) $ (16,108 )
Net Sales
Net sales for the year ended December 31, 2021 increased $45.1 million , or
115.7% to $84.1 million compared to $39.0 million for the prior year period.
This increase was primarily due to strong growth in sales volumes of our core
products, driven by expansion in the club channel, and, to a lesser extent,
greater demand from our existing retail customers.
Pardavimo savikaina
Cost of sales increased approximately$37.5 million , or 103.2%, to$73.8 million , during the year endedDecember 31, 2021 , as compared to$36.3 million for the prior year period, primarily due to an increase in the sales volume of our products, as well as to an increase in labor and raw material costs. The increase in labor and raw material costs increased primarily due to labor shortages and supply chain pressures related to the impact of the pandemic. The increases in costs were partially offset by the increase in sales of our self-manufactured products. Self-manufactured products, which have a lower cost than co-packed products, represented greater than 70% of our sales in the year endedDecember 31, 2021 , compared to substantially all of our products being co-packed in the prior year period. 41
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Bendrasis pelnas
Gross profit increased$7.6 million , or 284.4%, to$10.3 million for the year endedDecember 31, 2021 , compared to$2.7 million for the prior year period. This increase is primarily due to the increase in net sales and the greater proportion of goods sold being self-manufactured. In addition, gross profit for 2020 reflected$1.0 million of costs related to the write-down of unrecoverable raw material inventory, as a result of financial hardship of a co-manufacturer, as well as$0.5 million of costs related to an inventory write-down that occurred during that year.
Veiklos sąnaudos
Pardavimo ir platinimo išlaidos
Šioje lentelėje pateikiamos mūsų pardavimo ir platinimo išlaidos nurodytais laikotarpiais (dolerių sumos tūkstančiais):
Year Ended
December 31,
2021 2020 $ change %
Keisti
Pardavimas ir platinimas
-1.7 % Selling and distribution expense increased$7.4 million , or 97.1%, for the year endedDecember 31, 2021 , as compared to the prior year period. Selling and distribution expense increased primarily due to an increase in selling expenses related to the increase in sales, as well as to an increase in industry freight rates. Selling and distribution expense decreased as a percentage of net sales due to gaining economies of scale with regards to our operations.
Rinkodaros išlaidos
Šioje lentelėje pateikiamos mūsų rinkodaros išlaidos nurodytais laikotarpiais (dolerių sumos tūkstančiais):
Year Ended
December 31,
2021 2020 $ change % Change
Marketing $ 20,649 $ 2,351 $ 18,298 778.3 %
Percentage of net sales 24.6 % 6.0 % 18.5 %
Marketing expense increased $18.3 million , or 778.3%, during the year ended
December 31, 2021 , as compared to the prior year period. Excluding expense
related to equity compensation of $15.8 million , which was incurred in
connection with our IPO, marketing expense increased approximately $2.5 million
during 2021 as compared to 2020. This increase in expense occurred primarily due
to an increase in advertising to increase household awareness of our brand as
well as support sales growth. After excluding the effects of the equity
compensation marketing expense was 5.8% as percentage of net sales during 2021
as compared to 6.0% for 2020.
Administracinės išlaidos
Šioje lentelėje pateikiamos mūsų administracinės išlaidos nurodytais laikotarpiais (dolerių sumos tūkstančiais):
Year Ended
December 31,
2021 2020 $ change % Change
Administrative $ 27,792 $ 2,592 $ 25,200 972.2 %
Percentage of net sales 33.1 % 6.6 % 26.4 %
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Administrative expense increased$25.2 million , or 972.2%, during the year endedDecember 31, 2021 , as compared to the prior year period. Excluding expense related to equity compensation of$12.3 million , which was incurred in connection with our IPO, administrative expense increased approximately$12.8 million during 2021 as compared to 2020. This increase in expense occurred primarily due to activities related to public company readiness, as well as to an increase in our staff to support our growth. After excluding the effects of the equity compensation administrative expense was 18.4% as percentage of sales as compared to 6.6% for 2020.
Nuostolis dėl operacijų
As a result of the foregoing, loss from operations increased$43.3 million , or 438.8% to$53.1 million for the year endedDecember 31, 2021 , compared to a loss from operations of$9.9 million for the prior year period. Loss from operations as a percentage of net sales was (63%) for the current period, compared to (25%) for the prior year period. Excluding the effects of the aforementioned equity compensation, loss from operations as a percentage of net sales was (30%) for 2021. Interest Expense Interest expense decreased$0.3 million , or 5.6%, to$5.4 million during the year endedDecember 31, 2021 , as compared to$5.7 million for the prior year period. The decrease in interest expense was primarily due to lower outstanding debt balances during the year, in addition to a decrease in borrowing rates which occurred in late 2021.
Konvertuojamosios skolos tikrosios vertės pokytis
The Change in the fair value of our convertible debt of$8.9 million related to the increase in fair value of our convertible notes issued duringMay 2021 . The increase in fair value of the notes was mainly attributable to the decrease in the time to maturity of the notes, among other unobservable inputs used in the valuation. None of the increase in the value of the notes was attributable to instrument specific or Company credit risk. The notes were converted into Class A and Class B common stock in connection with our IPO, and as a result are no longer subject to fair value adjustments.
Grynasis nuostolis
As a result of the foregoing, our net loss increased$51.5 million , or 331.1%, to$67.1 million during the year endedDecember 31, 2021 , compared to a net loss of$15.6 million for the prior year period. Net Loss attributable to non-controlling interest As a result of the IPO and certain organizational transactions completed in connection with our IPO, the Members subsequent to the IPO became noncontrolling interest holders of RGF (the operating company) and owned 76% of the outstanding Class B common units, with the remaining 24% owned by the Company. Net loss for the year endedDecember 1, 2021 was therefore attributed to non-controlling interest holders based on the resulting ownership percentages. As the IPO and related organizational transactions were completed during the year endedDecember 31, 2021 , there was no non-controlling interest during the year endedDecember 31, 2020 .
Likvidumas ir kapitalo ištekliai
Our primary uses of cash are to fund working capital, operating expenses,
promotional activities, debt service and capital expenditures related to our
manufacturing facilities. Since our inception, we have dedicated substantially
all of our resources to the commercialization of our products, the development
of our brand and social media presence, and the growth of our operational
infrastructure. Historically, we have financed our operations primarily through
issuances of equity and debt securities and borrowings under our credit
agreements and, to a lesser extent, through cash flows from our operations.
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As ofDecember 31, 2021 , we had$29.7 million in cash (which includes restricted cash of$2.3 million ), current debt obligations of$0.3 million , and long-term debt obligations of$24.8 million . Additionally, as ofDecember 31, 2021 , we had current and long-term business acquisition liabilities (contingent consideration) of$8.1 million and$3.4 million , respectively. As a result of our IPO, which closed onNovember 9, 2021 , we received approximately$55.8 million in proceeds from the sale of our shares, after deducting underwriting fees and commissions, and offering expenses. In connection with the IPO,$35.0 million of convertible notes, which were due byMarch 31, 2022 , were converted into our shares of our common stock, relieving the Company of the balance of that liability at the close of the IPO. Additionally, duringDecember 2021 , we amended our credit facility to, among other things: (i) increase the maximum borrowing under the revolving credit facility from$18.5 million to$50 million ; (ii) extend the maturity date of the revolving credit facility toNovember 30, 2025 ; (iii) increase the borrowing limit under the cap-ex line from$3.0 million to$4.0 million ; and (iv) allow for additional borrowings of$7.5 million for certain lease agreements (Lease Line of Credit). As a result of the IPO, the reduction of convertible debt, expanded credit facility, and lease line of credit, we believe cash and cash equivalents on-hand and cash from operations, together with borrowing capacity under our credit facilities, will provide sufficient financial flexibility to meet working capital requirements and to fund capital expenditures and debt service requirements for the foreseeable future. We expect to make future capital expenditures of approximately$5.0 million to$10.0 million in connection with the enhancement of our current production capabilities. Our significant contractual cash requirements as ofDecember 31, 2021 , primarily include payments for operating and finance lease liabilities and principal and interest on loans. Our current and long-term obligations related to these items are outlined in the leases portion of Note 7- Leases, and Note 8- Debt, to the Notes to Consolidated Financial Statements within this Form 10-K. Additionally, we may incur purchase obligations in the ordinary course of business that are enforceable and legally binding and enter into enforceable agreements to purchase goods or services that specify all significant terms, including fixed or minimum quantities to be purchased and fixed or estimated prices to be paid at the time of settlement. As ofDecember 31, 2021 , we have payments for lease, business acquisition, and loan obligations of approximately$49.2 million , of which$9.7 million is payable within 12 months fromDecember 31, 2021 . We had no purchase obligations as ofDecember 31, 2021 .
Pinigų srautai
The following table summarizes our cash flows for the periods indicated (in
thousands):
Year Ended
December31,
2021 2020
(In thousands)
Net cash used in operating activities $ (26,755 ) $ (7,754 )
Net cash used in investing activities (4,739 ) (149 )
Net cash provided by financing activities 61,211
7 543
Grynasis pinigų ir pinigų ekvivalentų padidėjimas (sumažėjimas) 29 717 (360) Pinigai ir pinigų ekvivalentai laikotarpio pradžioje
28
388
Cash and cash equivalents at end of period$ 29,745 $
28
Cash used in operating activities was$26.8 million and$7.8 million for the years endedDecember 31, 2021 and 2020, respectively. The increase in cash used in operating activities is primarily due to the increase in our net loss during the 2021, in addition to increases in inventory and accounts receivable during the year. The increases in inventory purchased and in our accounts receivable occurred primarily as a result of the increase in our sales volume during the year. 44
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During the years endedDecember 31, 2021 and 2020, respectively, net cash used in investing activities was$4.7 million and$0.2 million , respectively. Included in cash used in investing activities during the year endedDecember 31, 2021 was purchases of property, plant and equipment of$2.5 million , which related to improvements and manufacturing equipment for our newly acquired City of Industry manufacturing facility, as well as to$2.2 million of expenditures related to our PMC asset acquisition.
Grynieji pinigai, gauti iš finansinės veiklos
Cash provided by financing activities totaled$61.2 million during the year endedDecember 31, 2021 , as compared to$7.5 million during the same period last year. This increase was primarily due to our IPO which was completed duringNovember 2021 , which resulted in net cash received related to the offering of approximately$55.8 million . In addition, there was a net increase in our borrowings during the year of approximately$1.1 million during the year. These borrowings were primarily used to fund operating activities as well as capital expenditures. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. New Accounting Standards
Apie naujus apskaitos standartus žr. konsoliduotųjų finansinių ataskaitų 2 pastabą „Svarbių apskaitos principų ir naujų apskaitos standartų santrauka“.
Svarbi apskaitos politika ir įverčiai
Critical accounting policies are those that require application of management's most difficult, subjective and/or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Not all accounting policies require management to make difficult, subjective or complex judgments or estimates. In presenting our financial statements in accordance with generally accepted accounting principles inthe United States of America ("GAAP"), we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, cost of sales and expenses, in addition to the required disclosures. Actual results that differ from our estimates and assumptions could have an unfavorable effect on our financial position and results of operations. The financial information discussed in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" is based upon or derived from our audited financial statements. We base the estimates, assumptions and judgments involved in the accounting policies described below on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our audited financial statements because they involve the most difficult, subjective or complex judgments about the effect of matters that are inherently uncertain. Therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Actual results may differ materially from these estimates. These estimates and assumptions include, but are not limited to, bad debt reserve, inventory costing including reserves, and net sales recognition including variable consideration for estimated reserves for discounts, incentives, and other allowances. For additional information, refer to Note 2 to our audited consolidated financial statements within this Form 10-K. 45
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Grynųjų pardavimų pripažinimas
Our net sales are principally derived from selling our products to our
customers. While our net sales recognition does not involve significant
judgment, it represents an important accounting policy. Net sales are recognized
upon transfer of title and risk of inventory loss to our customers. The customer
can direct the use and obtain substantially all of the remaining benefits from
the asset at this point in time. Net sales are recognized in an amount that
reflects the consideration we expect to ultimately receive in exchange for those
promised products, net of expected discounts for sales promotions and customary
allowances.
We offer sales promotions through various regional and national programs to our
customers. These programs include
in-store
discounts, as well as product coupons offered directly to consumers, which may
be redeemed at the point of sale. Customary allowances for early invoice payment
and shrinkage are also applied by our customers. The costs associated with these
programs are accounted for as variable consideration as defined under Accounting
Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers
("ASC 606"), and are reductions to the transaction price of the products.
Depending on the specific type of sales incentive and other promotional program,
we use the expected value method to determine the variable consideration. The
"expected value" represents the sum of the probability-weighted potential
outcomes of the consideration. We believe this to be the most accurate
representation of the impact of variable consideration on the transaction price
to the extent that it is probable that a significant reversal of cumulative
revenue recognized will not occur once the uncertainty underlying the variable
consideration (future event) is resolved.
We review and update our estimates and related accruals of variable
consideration each period based on the terms of our agreements, historical
experience, and expected levels of performance of the trade promotion or other
programs. Any uncertainties in the ultimate resolution of variable consideration
due to factors outside our influence are typically resolved within a short
timeframe, and therefore do not require additional constraint on the variable
consideration. We also offer compensation to our customers for access to shelf
space in stores, and associated payments are recognized as reductions to the
transaction price received from the customer upon the sale of associated
products.
Atsargos
Inventories are stated at the lower of cost or net realizable value. We record sales and other reductions in inventory through cost of sales using the first-in, first-out method. The cost of finished goods inventories includes ingredients, direct labor, freight-in for ingredients, and indirect production and overhead costs. We monitor our inventories to identify any excess or obsolete items on hand. We provide reserves on our inventories for estimated excess and obsolescence in an amount equal to the difference between the cost of inventories and estimated net realizable value. These estimates are based on management's judgment about future demand and market conditions, relative to inventory on hand. Once established, these adjustments are considered permanent and are not revised until the related inventory is sold or disposed of. Reductions in inventory are recorded as a component of costs of sales in the applicable period.
Neapibrėžtas svarstymas
Contingent consideration in a business combination is included as part of the
purchase consideration and is recognized at fair value as of the acquisition
date. For contingent consideration, we are responsible for determining the
appropriate valuation model and estimated fair value, and in doing so, considers
a number of factors, including information provided by valuation advisors.
Contingent consideration liabilities are reported at their estimated fair values
based on probability-adjusted present values of the consideration expected to be
paid, using significant inputs and estimates such as discount rates and
duration. Key assumptions used in these estimates include probability
assessments with respect to the likelihood of achieving certain milestones and
discount rates consistent with the level of risk of achievement. The fair value
of these contingent consideration
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liabilities are remeasured each reporting period, with changes in the fair value included in current operations. The remeasured liability amount could be significantly different from the amount at the acquisition date, resulting in material charges or credits in future reporting periods.
Nuosavybe pagrįsta kompensacija
Equity-based compensation for the year endedDecember 31, 2021 includes restricted stock units ("RSU") awarded to certain employees and directors. We measure equity-based compensation expense at the grant date based on the fair value of the award and recognize the expense on a straight line basis over the requisite vesting period. The fair value of the RSUs is based on the closing price of our stock on the date of grant.
Konvertuojama skola
We account for convertible debt at fair value, using valuation models that require us to make various key assumptions, which include the discount rate, derivative values, and certain probabilities of occurrence. We adjust the fair value of convertible debt quarterly, from the inception of issuance through the date of conversion. Income Taxes We account for income taxes pursuant to the asset and liability method which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. We record a valuation allowance against deferred tax assets when it is more likely than not that all or a portion of a deferred tax asset will not be realized. This involves using judgment in evaluating the realizability of deferred tax assets, and includes as part of this evaluation, estimating future taxable income which is inherently uncertain. If it is later determined that in the future that it is more likely than not that certain deferred tax assets may be fully utilized, based on certain assumptions, as well as facts and circumstances, the valuation allowance applicable to that particular deferred tax asset would be reversed and recognized through earnings in the period the determination was made.
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